​* Revised May 26, 2011. The revision corrects text on page 5 of the original release. A footnote has been inserted in this version where the correction has been made.

​Like other debt instruments, residential mortgages involve credit risk. That risk arises from uncertainty over whether the borrower will perform as required by the mortgage document. Mortgage insurance provides protection against the losses created by mortgage defaults. Most mortgage insurance covers individual loans, although lenders or other investors may purchase pool policies, which protect against losses on groups of loans. The current crisis in the U.S.

​The 12 Federal Home Loan Banks (FHLBanks) are privately capitalized, government-sponsored enterprises. Unlike Fannie Mae and Freddie Mac, which are publicly traded and owned, each FHLBank is a cooperative. In keeping with that cooperative business model, all capital stock in an FHLBank is owned by member institutions, which purchase stock from their FHLBank at par and the FHLBank repurchases or redeems stock from its members at par.

With about 10 percent of the US housing stock and about 17 percent of its total value, California’s housing market has a large impact on the economy of not only California, but also the nation as a whole. To get an accurate picture of real estate market conditions in the state, it is necessary to evaluate multiple market indicators. This Mortgage Market Note attempts to provide a comprehensive look at the most recent available data on housing market conditions in California.

The Housing and Economic Recovery Act of 2008 (HERA) authorized the Secretary of the Treasury to support Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs) by purchasing obligations and other securities from those government-sponsored enterprises (collectively, the housing GSEs). HERA gave the Secretary broad authority to determine the conditions and amounts of such purchases.

The Housing and Economic Recovery Act of 2008 (HERA) authorized the Secretary of the Treasury to support Fannie Mae, Freddie Mac, or the Federal Home Loan Banks (FHLBs) by purchasing obligations and other securities from those government-sponsored enterprises (collectively, the housing GSEs). HERA gave the Secretary broad authority to determine the conditions and amounts of such purchases.

A secondary mortgage market consists of financial institutions and individuals that buy and sell residential mortgages and mortgage-backed securities (MBS), which are financial assets whose cash flows are derived from groups of mortgages. The secondary market in the U.S. is highly developed. Today, three-quarters of the dollar volume of single-family loans are funded through the sale of MBS, up from three-fifths in 2001, and most sales of whole loans occur as part of the creation of pools of mortgages that collateralize MBS. This primer on the U.S.

Discussions about the capital of Fannie Mae and Freddie Mac are sometimes confusing because of the various alternative types of capital and capital requirements. This note is intended to provide a quick reference for the different measures of capital, the capital requirements, the capital classifications, and data for recent years and the first quarter of this year.

Fannie Mae and Freddie Mac are prohibited by charter from purchasing singlefamily conventional mortgages with unpaid principal balances above the conforming loan limit. For mortgages that finance one-unit properties, that limit is $417,000 in 2008, as it was in 2006 and 2007. Higher limits apply to loans that finance properties with two to four units. The limits for properties of all sizes are 50 percent higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

The Emergency Home Finance Act of 1970 chartered Freddie Mac to provide a secondary mortgage market for thrifts and other originators of conventional mortgages. The Act also allowed Fannie Mae to purchase conventional loans and established a conforming loan limit for both Enterprises of $33,000. The Act set the conforming loan limits 50 percent higher for three statutorily-designated high-cost areas: Alaska, Hawaii, and Guam (the U.S. Virgin Islands were added later).